To start, a short recap of this series and my last post:
Four dimensions are relevant to understanding the ongoing changes in banking:
1) The change in back-end tech for banking (discussed in my earlier post).
2) The change in front-end tech for banking, bringing totally new capabilities to create higher customer value and new business models (today’s post).
3) Strengths and weaknesses for existing banks vs. new start-ups. It’s critical to match strategy and business model with core competencies and capabilities.
4) The change of the eco-system. There will be consolidation as well as fragmentation but also totally new models, both vertical and horizontal, that emerge (this is the really interesting part!).
Swedish banking is more sophisticated compared to other banking markets globally. We’ve had Internet banking since the mid-’90s, which have developed continuously. We have “real-time” solutions like Swish, a great digital identity model (BankID), and we’re also very digital, especially regarding cash.
Today, there are new technical enablers to strengthen the front-end of banking. Biometrics will most likely be an important ingredient in increasing security and convenience; new bio-solutions have capabilities to adapt and apply higher security if, for instance, a customer is at a new geolocation, the amount of the transaction is different, etc. With higher security, digital banking can be opened to new offerings, but will also become more convenient (and safe) making complicated errands easy.
Other important front-end tech is, of course, Business Intelligence-solutions (BI) and Digital Process Management (DPM). In BI, I include Big Data. The Swiss banks have great respect in using BI to avoid bad will and harm integrity among customers. However, research shows that most customers would like banks to use BI “ethically” to provide better and more precise offerings matched with the customer needs in a proactive way. Today, customers are unhappy with banks that are oblivious to the information that can be easily understood from accounts and family situations.
We’ve seen great examples of improved front-end technology in the last decades: Avanza and Nordnet have revolutionized front-end in their niche. Meniga, Mint and also Verksamt.se have really brought front-end to a new level. And this is only the beginning. Next-generation front-end compared to today’s front-end is like comparing Spotify to vinyl records.
Back- and front-end are connected; with better back-end you can do much more in the front-end. Today, one barrier for the big banks is not a lack of “front-end-ideas,” but rather a lack of “back-end-capability.” The new actors though, can do much more and they can do it faster.
Over time, the big, existing banks will copy successful front-end practices. But we can expect more bank-shopping in the future as people become customers of many banks.
In the coming articles “Strengths and weaknesses for different players (3)” and “The change of the eco-system (4),” I will discuss how a strong front-end approach is an important driver of this process — interesting in that it’s partly a new market-paradigm.
“We ain’t seen nothing yet!”
As a Client Relationship Executive in Banking at CSC, Patrik Merup helps clients to link business challenges and opportunities into IT solutions. Patrik’s expertise is retail banking after 20+ years in a variety of roles in the senior management team of three different retail banks before he joined the IT supplier side of banking. Patrik has MBA degree from Stockholm School of Economics and Stanford University and lives with his family in the Archipelago outside Stockholm, Sweden. Connect with him on LinkedIn.